SAN FRANCISCO — LaSalle Hotel Properties (NYSE: LHO) has purchased the Hotel Vitale in San Francisco for $130 million. The 200-room hotel is located at 8 Mission St. at the intersection of the Embarcadero Waterfront and the Financial District, across from the Ferry Building Marketplace.
Newly constructed in 2005, the hotel has undergone $6.5 million in subsequent capital expenditures including restaurant upgrades and new guestroom furniture. Hotel Vitale’s 200 guestrooms average 375 square feet. LaSalle funded the acquisition through its senior unsecured credit facility.
“We are thrilled with this acquisition,” says Michael Barnello, president and CEO of LaSalle Hotel Properties. “Hotel Vitale is outstanding physically and in terms of its location. The hotel is surrounded by demand generators that attract corporate and leisure business, and the views from the hotel are breathtaking.”
The hotel was purchased subject to a ground lease with the City & County of San Francisco, Municipal Transportation Agency, which expires on March 8, 2070.
The hotel is within walking distance of San Francisco’s office towers in the Financial District and South of Market (SoMa) area. There is roughly 21 million square feet of existing office space and 3.5 million square feet of new office development within six blocks of the hotel.
Several of San Francisco’s most notable companies surround the hotel, including Salesforce, Google, Gap and PG&E. Hotel Vitale is also near world-class retail and entertainment attractions, such as Steuart Street’s restaurant row, Moscone Center, AT&T Park and Union Square.
For the second year in a row, the Urban Land Institute (ULI) named San Francisco as the No.1 commercial real estate market in its Emerging Trends in Real Estate 2014 report. The report’s “respondents feel particularly good about hotels in San Francisco,” ranking the city the second best hotel market in the United States from an investment standpoint.
According to PKF Hospitality Research LLC, San Francisco’s hotel market finished 2013 at $155.66 in revenue per available room (RevPAR), a 12.9 percent increase from its 2012 RevPAR of $137.86. PKF forecasts that San Francisco will increase another 11.4 percent in RevPAR this year to $173.42.
The city’s hotel market experienced a 3.3 percent increase in occupancy in 2013, as well as a 9.3 percent gain in average daily room rates (ADR). The occupancy for 2013 was 82.9 percent, up from 80.3 percent in 2012. The ADR for 2013 was $187.67 compared to $171.73 in 2012. PKF forecasts that occupancy will increase to 83.7 percent in 2014 and ADR will increase 10.4 percent to $207.13.
“We are excited about increasing our presence in San Francisco. Room demand is at peak levels and supply growth is expected to be limited for the next several years, which bodes well for owners and operators,” says Barnello. “Market performance has been strong, and we are pleased to have acquired our sixth hotel in San Francisco.”
Americano Restaurant & Bar, the hotel’s signature dining outlet, is comprised of a cocktail lounge, indoor dining area with 180-degree panoramic views, 18-seat private dining room and 3,000-square-foot outdoor patio overlooking the Embarcadero and San Francisco Bay.
The property offers 11,300 square feet of meeting and event space as well, including several outdoor spaces. Commune Hotels and Resorts manages Hotel Vitale.
LaSalle Hotel Properties is a Bethesda, Md.-based real estate investment trust that owns 46 upscale, full-service hotels. The company’s portfolio totals approximately 11,600 guest rooms in 10 states and Washington, D.C.
The stock price of LaSalle Hotel Properties closed at $32.37 per share on Friday, up from $26.40 per share at this time last year.
— John Nelson